Sector developments and company hires

CRR amendment opinion published

The EBA has published an opinion on the regulatory treatment of securitisations of non-performing exposures (NPEs), recommending various amendments to the Capital Requirements Regulation (CRR) as well as to the Securitisation Regulation to remove the identified constraints. The opinion is addressed at the European Commission and contributes to the objectives of the Council of the EU’s action plan to tackle NPLs in Europe and a copy of the opinion has been sent to the European Parliament and the Council.

The opinion explains that the regulatory framework imposes certain constraints on credit institutions using securitisation technology to dispose of NPE holdings. Namely this involves very high capital requirements on investor credit institutions under the CRR: the pre-eminent securitisation capital methods (the SEC-IRBA and the SEC-SA) and the look-through approach has caused disproportionately high capital charges on NPE securitisation positions when compared to relevant benchmarks and, as a result, tend to overstate the actual risk embedded in the portfolio. Other constraints include compliance challenges as regard to certain risk retention and due diligence requirements under the Securitisation Regulation.

As such, the opinion recommends that the Commission consider a number of targeted amendments to the CRR and the Securitisation Regulation to remove these constraints, whilst maintaining the integrity of the prudential framework. The recommendations should be viewed as preliminary and subject to additional analytical work, namely the amendments to the CRR that may require limited calibration. Furthermore, the potential amendments to the CRR should be, to the extent possible, consistent with comparable international standards.  

The opinion has been drafted in accordance with Article 34(1) of Regulation (EU) No 1093/2010, by virtue of which the EBA may, on its own initiative, provide opinions to the European Parliament, the Council and the Commission on all issues related to its area of competence.

Legacy RMBS repackaged

Barclays has structured two new UK RMBS transactions backed by loans from legacy Northern Rock and Bradford and Bingley portfolios. Dubbed Kentmere 1, sized at £752m and Kentmere 2, £171m, the portfolios consist of mortgages currently securitised in Slate No.1 and Slate No.2, respectively.

Both Kentmere 1 and 2 are rated triple-A/Aaa by S&P and Moody’s on the £672.77m and the £153.24m floating rate class A notes, respectively. The class A notes in both transactions are priced at SONIA plus 80bp and all tranches are privately placed.

With regard to Kentmere 1, the legal title to the mortgages is initially held by Tulip Mortgages Limited, Chaconia Mortgages Limited and Rose Mortgages Limited; following an interim period that is expected to end in January 2020, the legal title to the mortgages will be transferred to Cartmel Mortgages Limited, Grasmere Mortgages Limited and Lindale Mortgages Limited.

With regard to Kentmere 2, the legal title to the mortgages is initially held by Trillium Mortgages Limited; following an interim period that is expected to end in January 2020, the legal title to the mortgages will be transferred to Kendal Mortgages Limited.